US Lenders Take Legal Action Against Byju’s Subsidiaries
In a recent escalation of challenges for the edtech startup Byju’s, a group of US lenders has approached the court to enforce bankruptcy oversight on several units tied to the company. The creditors, led by HPS Investment Partners, claim that millions of dollars are being siphoned from these subsidiaries, according to a Bloomberg report.
On June 6, the creditors filed involuntary Chapter 11 cases in Delaware against Neuron Fuel Inc., Epic! Creations Inc., and Tangible Play Inc. These companies were formerly associated with Byju’s Alpha, a unit that defaulted on a $1.2 billion loan and was subsequently put into bankruptcy earlier this year.
The lenders have accused Byju Raveendran, the founder of Byju’s, of violating their debt contracts by refusing to provide financial details about the three subsidiaries facing bankruptcy. They argue that the spending of these units should be restricted immediately, and a trustee might need to be appointed to manage them.
Byju’s plans to contest the case. A company spokesperson stated, “The lenders claim to be creditors of these entities, notwithstanding that the question of whether the underlying loan amount is due and payable remains to be decided,” referencing a lawsuit challenging whether the $1.2 billion loan is in default.
In May, the US-based lenders urged the National Company Law Tribunal (NCLT) to restrain Byju’s from pledging, selling, or transferring its shares. The insolvency plea was filed through the US-based non-bank loan agency Glas Trust Company LLC. The lenders alleged that Byju’s was borrowing more money and alienating its shares, causing significant prejudice to them.
Over 100 lenders had loaned money to Byju’s US entity, Byju’s Alpha Inc., which is currently undergoing a voluntary bankruptcy process in a Delaware court.
Byju’s assured employees that salaries and statutory dues would be cleared based on cash flow. The CTO shared commitments from the town hall with founder Byju Raveendran, including paying February and March salaries by June 30 (or worst-case scenario, by July 8). The communication was conveyed in a professional tone, aiming to reassure the employees.
